We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don’t know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? Because they are all trying to debase themselves. It’s a peculiar time in world history.

- Jim Rogers, the investor, adventurer and commentator, as quoted at the splendid Zero Hedge website.

(I like the site’s motto: “On a long enough timeline the survival rate for everyone drops to zero.”)

On a related theme of currency debasement and government tactics, this book, Currency Wars, looks a gruesomely entertaining read.

 

21 comments to Samizdata quote of the day

  • PersonFromPorlock

    Thank God! If everyone’s currency is debased we’ll still be able to get rich doing each other’s laundry.

  • It’s like trying to find the best price from a gas provider, you know that as soon as you switch from Southern Gas to Eon for that 10% price difference, Eon will raise their prices by at least 10% wiping out any savings.

    Same with currencies as soon as you switch from one to the other a tidal wave of electronic money will be printed or bad economic data will cause a similar loss (on top of FX charges).

    There are no good fiat currencies, just that some are worse than others.

    “It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.”

    Prime Minister Harold Wilson

  • RAB

    I remember the Wilson quote well. How he went on tv and said that with a straight face and got away with it, is beyond my understanding. Much like Heath’s “Membership of the Common Market will involve no loss of Sovereignty whatsoever.”

  • Laird

    “I own the dollar, not because I have any confidence in the dollar and not because it’s sound – it’s a terribly flawed currency – but I expect more currency turmoil, more financial turmoil. During periods like that, people, for whatever reason, flee to the U.S. dollar as a safe haven.” I’m convinced that’s the only reason the dollar is as strong as it is vis-a-vis other currencies: it’s the cleanest dirty shirt in the laundry. That’s why inflation-protected TIPS bonds are trading at negative yields: people are paying for the privilege of holding dollars. When the inflation-spawned chickens inevitably start coming home to roost and the dollar starts to fall, everything will come crashing down very quickly. It will not be pretty.

    There’s always something worth reading at Zero Hedge. You may not like the message but you need to hear it.

  • RRS

    Within any “economic area” in which transactions are conducted primarily in terms of a specific currency (whether or not as credit transactions) a crucial consideration for those transactions is the establishment of prices of assets within that economic area.

    In terms of conditions in differing economic areas, relative currency valuations are likely to be ultimately determined by the productive value (without regard to prices) that can be achieved by use of those assets in each particular economic area.

    It is possible, even plausible, to conjecture, for example, that the productive value of assets in the economic area of the US dollar will come to be anticipated as greater than that available in the economic area of the Euro.

    Asset prices are being distorted, in terms of currency measures throughout the developed economies. However, it is most likely that the relative prospects of productivity from assets in any particular economic area will determine relative standings, rather than some artificial relativity of currency values.

  • [...] quote of the day (Quote of the week at least IMO, but it’s their blog and they decide that kind of stuff [...]

  • Laird

    RRS: “However, it is most likely that the relative prospects of productivity from assets in any particular economic area will determine relative standings, rather than some artificial relativity of currency values.” I don’t entirely agree.

    Certainly the first part of that sentence makes sense, but absent governmental intervention the relativity of currency values is anything but “artificial”. Rather, it is the market’s assessment of precisely those “relative prospects of productivity” between the economic areas being compared. Those prospects are largely a function of each local government’s non-monetary policies (regulatory burden, tax rates, etc.), but they are expressed in the form of prices which reflect the intrinsic health of the local currency.

    If the US were generally viewed as being more conducive to economic productivity than, say, Europe, that should indeed attract foreign investment. But I’m not aware that is happening. The foreign capital which is fleeing the euro in favor of the dollar isn’t going into productive assets, but rather financial ones. This is pushing bond yields down and stock prices up, but neither of those is directly correlated with improved productivity. So I view the relative strength of the dollar not as a global vote of confidence in the US economy, but rather as a simple artifact of supply-and-demand: more demand for dollars and less for euros. And while that may be, in part, a reflection of the overall strength of the US economy, in large measure I think it’s simply an act of desperation: there is simply nowhere else to go. Which is why I think that, when quantitative easing is no longer sustainable and inflation cannot continue to be artificially suppressed and/or disguised, the dollar will collapse and bring the rest of the world’s currencies down with it. And once it starts it will happen very quickly.

  • Julie near Chicago

    “On a long enough timeline the survival rate for everyone drops to zero.”

    As we all know, Keynes remarked), “In the long run, we’re all dead.” (I understand this was intended as dry humour. That seems quite plausible to me.)

  • Paul Marks

    Ideas have consequences.

    The ideas (the beliefs) of the academic, political and media elite – are very bad indeed.

    So the consequences will be very bad indeed.

    The one good thing that might come from this – is discrediting these terrible ideas.

    However, even this is not certain.

    As the left (including the “libertarian” left) will be on hand – to blame all the horror on “the rich” and “the corporations”.

  • Tedd

    …it’s the cleanest dirty shirt in the laundry.

    That’s big enough to fit.

    As the left (including the “libertarian” left) will be on hand – to blame all the horror on “the rich” and “the corporations”.

    Exactly. Anyone who thinks it’s not critical to change minds about economic issues before a currency collapse is ignoring history. The very strength of neo-Keynesian and Marxist ideas today is due to their advocates prevailing in the debate during and after the Great Depression, contra evidence and reason. Any waning of the strength of those ideas in the latter 20th century was due to increases in prosperity causing fewer people to be seeking scapegoats, that’s all (as the nature of the debate post-2008 demonstrates).

  • Anyone who thinks it’s not critical to change minds about economic issues before a currency collapse is ignoring history.

    That’s a very good point that I personally haven’t thought about, Tedd.

  • Ed Snack

    Laird, Zero Hedge can be entertaining, but the signal to noise ratio is terrible. Go to their archives and read what they were saying , say, 6 months and 1 year ago, and see how accurate their prognostications look now in hindsight.

    Answer, for me anyway, pretty damn terrible. But it is fun to read in a sort of “all the worst news you could want” sort of way.

  • jb

    Zerohedge often has great articles (I remember one in particular on the mechanics of the repo market and brokers that was more informative that a full semester of advanced finance); however, there is a more than faint oder of anti-semitism that occasionally makes its way into some of the articles (like constantly referring to Ben Bernanke, a despicable man for sure, as Ben “Shalom” Bernanke). The comments section is so full of Jew hatred, protocol of zion like conspiracy and racism that it seems like the second home for the Hitler youth.

  • RRS

    Laird:

    Rather, it is the market’s assessment of precisely those “relative prospects of productivity” between the economic areas being compared.

    Precisely

  • Laird

    jb, I do agree that there is sometimes a whiff of anti-semitism on Zero Hedge (especially in the comments), but please note that Shalom is in fact Bernanke’s middle name.

  • Laird, this seems to be similar to the way some like to include Obama’s middle name in any reference to him.

  • jb

    Laird,

    That’s true, but if you read ZH consistently it is pretty clear to any objective person that the reference is meant to point out that he is Jewish, not to be complete in people’s names.

    That said, I don’t think it diminishes the point that there is regularly some EXTREMELY good analysis on ZH. It just seems to me a blind spot, that I have to say exists on the far end of some libertarian circles (I consider myself a libertarian) that pass over into conspiracy madness.

    That is one of the things that I love about this site and the commentators hear. I consider myself a Samizdata libertarian.

  • jb

    “That is one of the things that I love about this site and the commentators hear. I consider myself a Samizdata libertarian.”
    To be clear, I mean to say that the discussion here has NEVER (that I have seen) ever crossed into that type of conspiracy talk. I can honestly say that I have learnt a lot from the writers and commentators here.

  • Indeed, Jb. That is because on this site extreme stupidity (such as racism, and outlandish conspiracy theories used to explain things that can easily be explained with actual boring facts) is not tolerated.

  • Paul Marks

    I have not been to the site (and I do not intend to), but I am starting to smell the “Rothschilds control …..” B.S.

  • Laird

    Fair point, Alisa. And I do agree with you, jb.